Legal Capacity to Enter Contracts

• An OPC is a separate legal entity under the Companies Act, 2013, and can enter into contracts in its name.
  
• It can sign agreements with vendors, clients, employees, consultants, and service providers.
  
• The OPC can sue or be sued independently, making it fully capable of managing legal and commercial relationships.
  
• Contracts are not signed in the name of the sole member but in the name of the company itself.
  
• This separation offers limited liability protection to the member in case of disputes.
  

Authority and Execution

• The director of the OPC (often the sole member) has the authority to negotiate, approve, and sign contracts on behalf of the company.
  
• If additional directors or managers are appointed, their roles and limits must be defined by board resolutions or the Articles of Association (AoA).
  
• All contracts must be reviewed, documented, and signed with proper authorization.
  
• Use of the company’s official seal or letterhead is advised for formal agreements.
  
• Clear execution avoids disputes about validity or authority later.
  

Types of Contracts Handled

• Common agreements managed by an OPC include:
  
  • Service agreements with vendors or clients
    
  • Employment contracts with staff
    
  • Lease or rent agreements for office space
    
  • Non-disclosure agreements (NDAs) for confidentiality
    
  • Loan agreements with banks or members
    
• Each contract must define terms, duration, payment conditions, and legal remedies.
  

Documentation and Record-Keeping

• The OPC must maintain copies of all executed contracts and supporting documents at its registered office.
  
• Contracts must be numbered, dated, and stored securely, either physically or electronically.
  
• These documents may be reviewed during audits, legal proceedings, or regulatory inspections.
  
• Proper record-keeping supports transparency, accountability, and legal defense when needed.
  
• All contract obligations and payments should be reflected in the books of account.
  

Legal and Compliance Considerations

• Contracts must be legally enforceable, clear in terms, and compliant with applicable laws.
  
• The OPC should avoid oral agreements or undocumented commitments to reduce legal risk.
  
• Stamp duty, where applicable, must be paid to ensure enforceability in court.
  
• Legal review is advisable for high-value or long-term contracts to avoid future disputes.
  
• If a contract involves a related party (e.g., the member’s relatives), disclosure and board approval may be required to comply with the Companies Act.